Success in Excess?

In 1989, shortly after he was charged with helping to pump life into the newly designated Third Street Promenade, Jeff Mathieu, Santa Monicas economic-development manager, visited the outdoor mall to catch an evening movie. Mathieu entered the old Criterion, a cavernous 1,000-seat theater, sat down and looked around. "My wife and I were the only people there," Mathieu recalled. "I knew this would be a challenge."

Today, Mathieu must squeeze past as many 15,000 visitors who, on warm weekend nights, pack into a single block of the narrow strip that stretches from Broadway to Wilshire Boulevard. Throngs gather round a boisterous assortment of street performers who draw, play, bang and dance for donations till well past midnight. Diners fill sidewalk tables, and moviegoers form long lines to enter sold-out shows.

In 10 short years, the Third Street Promenade has gone from blight to boom, drawing an estimated 4 million visitors a year from across the region and around the world. It is the proverbial goose that lays the golden eggs, only the eggs keep getting larger and larger.

"It just took off," said Herb Katz, an architect who sat on the Santa Monica City Council during the early stages of the transformation, and now chairs the Bayside District Corporation board, which oversees the downtown district, including the Promenade. were scared to death. It was so instantaneous. It was like winning a million bucks. What do you do?"

Last year, the Promenades 150 establishments generated $158.7 million in gross taxable sales, a 440 percent rise in 10 years, according to the city. And more than $500 million in private funds have been pumped into the strip over the past decade.

But Third Streets sudden prosperity has placed the city in the unusual position of managing  if not reining in  success. During the past month, the City Council has approved a measure to better manage the flow of cars, cabs, trucks, pedestrians and bicyclists that often clog the intersections and alleys, and to encourage the crowds to spill over into flanking streets. The council also passed an unprecedented ordinance that requires street performers to rotate spots every two hours and trim the size of their setups and displays. And it is contemplating a moratorium to stem the flood of retailers that threaten to price out the restaurants that give the promenade much of its lively ambiance.

"Yes, the Promenade is far more active and has far more people than we ever imagined it would, especially on weekend nights," said former Santa Monica Mayor Dennis Zane, the politician widely credited with helping to usher in the boom years. "For many people in the community, I think its fair to say there are too many people. The best thing that could happen to the Promenade is if Westwood had a resurgence."

The wild success of Third Street has recently pitted a liberal council, which fears that skyrocketing rents threaten to turn whats left of the eclectic strip into a faceless row of corporate retailers, against property owners, who champion the free-market forces that have in large part led to the remarkable boon for their pocketbooks, as well as for the citys coffers.

Rents have shot up from a dollar or two per square foot in 1989 to around $8  with some spaces going for as much as $12 a square foot, prices that are second only to those of Rodeo Drive in Beverly Hills. In fact, space is such a precious commodity that one tenant was reportedly offered $300,000 to vacate the premises so another store could move in.

"It has gone from where there was very little interest to where it is a premier location to open new concepts and flagship stores on the West Coast," said Robert O. York, partner in the Fransen Co. of Santa Monica, a consulting firm hired to help lure businesses to the Promenade. These businesses included a number of national companies that turned the Promenade into a launching pad for retail chains and new retail concepts.

The success has drawn some two-dozen major retailers to the bustling strip, where the marquee presence in front of millions of strollers a year is perhaps as valuable as the retail dollars they bring in. The chains include the Gap, Banana Republic, Guess, Urban Outfitters, Barnes & Noble, Borders, Rockport and J. Crew. Some foreign companies, such as Adidas and Puma, have chosen the Promenade for their first U.S. stores.

The success of the chains has helped some independents  such as Puzzle Zoo and Undercover  which have cashed in on the boom. It took Undercover owner Adam Shaffer one visit to decide to open shop on the Promenade in 1993. "I came on a Friday night," said Shaffer, whose store sells high-end womens apparel. "I never saw so many people in one place except for Disney World." Shaffer sold his business on the East Coast and headed west.

Now, he would like to see other high-end stores follow suit. And while he acknowledges that the larger stores are turning the strip into a more mainstream street, he believes the chains also have helped add luster to the strip. "The image of the Promenade has come far from where it was five years ago," Shaffer said.

But success has come with a price. The corporate stores have nudged out many of the unique independent outlets  the small booksellers, record shops and funky boutiques  threatening the eclectic flavor that has helped make the Promenade a success.

"When leases are coming up, they cant hold on," said Margie Ghiz, owner of Midnight Special Bookstore, a progressive independent book seller flanked by Borders and Barnes & Noble. Ghiz says she is fortunate to have a generous landlord who supports her community-oriented cultural approach. But she worries that other independents arent so lucky: "Youre seeing this mass moving-in of chain retailers. I dont think there are 10 independents any more."

It was the independents that helped give the Promenade its "hip image," said Tony Palermo, partner in Teasers restaurant, one of the pioneering businesses on the revitalized strip. Now, he said, "Its just turning out like corporate America. I think the Promenade is a great place, but I think the greed is setting in. I think people are going to be priced out of the market."

That is the fear that has spurred the City Council into action. "There are trends on the Promenade which, if not reversed, could lead to its demise," said Councilman Michael Feinstein, a state Green Party leader. "We lost so many small stores when it moved to large national chains that its out of balance."

Feinstein is particularly disturbed by the imminent demise of the International Food Court, one of his favorite culinary haunts, which is losing its lease to make way for a Bebe chain store. Feinstein is quick to note that the September closing, which in great part spurred the proposed moratorium, comes on the heels of the loss of the King George Pub  "an inviting social space"  which has been replaced by the Gap, turning the intersection of Third Street and Santa Monica Boulevard into "a cold corner where its front door reveals an elevator."

To stem the tide, Feinstein and fellow councilman Paul Rosenstein have asked staff to study the possibility of imposing a moratorium on the conversion of restaurants to retail spaces. "The restaurant owners made it clear to me that they thought their days were numbered," Rosenstein said. "They had their doubts they could afford the exorbitant rates being charged." Ironically, the proposal flies in the face of a previous measure that restricted the number of restaurants and liquor outlets per block.

And there also is talk of imposing a limitation on the square footage retailers can occupy, a proposal former mayor Zane endorsed at a July 26 meeting of the Santa Monica Leaders Club. "My concern is the loss of smaller indigenous retailers who have been there from the beginning that find themselves the victim of their own successes," Zane, who often lectures on the success of the Promenade, told the gathering of civic leaders. "How many Banana Republics and Starbucks can there be?"

The battle between property owners and city officials went public the following week, when a group of concerned landlords met on August 4 at one of the Promenades three movie theaters to discuss the proposed moratorium on restaurant conversions. The landlords sent a clear message, heeded by the Bayside District board, which voted unanimously to oppose the declaration of an emergency: Mess with market forces, they warned, and you will send a chilling effect that could help starve the goose.

"Its hard to understand how suddenly we have an emergency," said property owner Ernie Kaplan. "I never heard anybody say there is a problem. We live in a capitalist economy. The market drives what basically will be on the Promenade. The Promenade has been healthy because these market forces have been working."

Feinstein, who was at the meeting, disagreed. "As a city, we dont want to simply sit back and let market forces entirely shape an area that is such an important social center," Feinstein said. "Our role is not to just hope that market forces that go up and down are going to give us everything for everybody."

"A lot of Santa Monica money has gone into creating the Promenade," said Councilman Kevin McKeown, who also is a member of the Green Party. "If we allow the success to crowd out our people, we do our community a disservice. If were just chain stores, why not just go to the Galleria?"

The resurgence of the Promenade never relied solely on market forces. In fact, it was the result of a groundbreaking partnership between the public and private sectors, a partnership that capped a 25-year effort by the city to pump life into its dying downtown center.

The first attempt came in 1965, when the city  following the recommendations of a consultants report from the 1950s  closed the street to automobile traffic, encouraging pedestrians to walk the three-block stretch, which was renamed the Santa Monica Mall. It also improved parking, eventually building six parking structures on Second and Fourth streets over the next few years. The opening drew nationwide attention, but the initial interest soon waned. "After the groundbreaking, people came to see it for the first six months," said City Manager John Jalili, "and they never came back."

After the Frank Gehrydesigned Santa Monica Place opened just south of the Promenade in 1980, the outdoor mall went into further decline. The city even considered a proposal to build a people mover, a horizontal elevator that would carry visitors along the three-block stretch. The idea quickly died. City officials, Jalili said, "feared people would bypass the Promenade and go to Santa Monica Place."

By the 1980s, the street had become a blighted row of struggling shops and vacant storefronts. "Seedy is a nice word," said Katz. "We used to joke that this is a hell of a place to go at noon. We joked about turning it into Porno Alley." Once again, city officials began to explore ways to salvage Santa Monicas dying core. The challenge was met by landlords and tenants who worked closely with the city. "We had a group of committed stakeholders who wanted to invest and make a major change," Mathieu said. "These 55 people were as driven a group as Ive ever seen. They were people who had a dream and wanted to put their blood, sweat and tears behind it."

A $13.3 million bond issue was approved to make much-needed public improvements, an assessment district was formed to help pay off the bond and a non-profit corporation was created to oversee the downtown center. In case the experiment  which had been tried with little or no success in some three-dozen centers across the country  didnt work, the city made the traffic barriers removable.

The city provided the final lift when the council banned movie theaters from locating anywhere but on the Promenade. Three multiplexes soon opened their doors and the restaurants and retailers followed. Boosted by the sudden collapse of Westwood Village after a rash of gang violence emptied its streets in the early 1990s, the Promenade soon became one of the Los Angeles areas biggest attractions.

The unprecedented success of the Promenade has made it a model for the future of outdoor malls  a cross between an old-fashioned central plaza and a commercial strip. And the wary council members who instinctively laid the groundwork in 1989 now lecture on its success to audiences as far away as Boston and Düsseldorf, Germany.

"The success of the Promenade has confounded the expert thinking of the time," said Zane. "We did not envision downtown as a retail center. We had to be something different. We thought of it as a community center with dining, cinema and some kinds of entertainment."

"Doing it was kind of like were on a discovery, we dont know what were doing," Katz added. "It was exciting. We had nothing to lose. Now were on top. Weve got everything to lose."